The Revenue Commissioners (Revenue) have issued guidelines on the criteria for a stamp duty refund for certain residential property developments.
Following changes under the 2018 Budget, a 6% rate of stamp duty is now payable on the purchase of non-residential land. However, where the land is used to develop residential units, a refund of up to two thirds of the stamp duty paid (4%) may be claimed. The aim of the scheme is to encourage the timely development of much needed housing units.
Who does the scheme apply to?
The scheme applies to the development of large housing developments and one-off houses. The scheme does not apply where property is refurbished or where partially built units are completed.
In order to qualify under the scheme, the transfer or conveyance conveying the land must be executed on or after 11 October 2017 and stamp duty must be paid at a rate of 6%.
What are the criteria I must satisfy to be eligible for a refund?
- Construction works must commence within 30 months after the execution of the transfer or conveyance but no later than 31 December 2021
- The development must be completed within 2 years of the acknowledgment of the commencement notice or 7 day notice by the local authority and no later than 31 December 2023
- The development must meet the “75% test” which means that 75% of the total surface area of the land must consist of dwelling units or the gross floor space of the dwelling units must amount to at least 75% of the total surface area of the land
What rules apply to phased developments?
Where a development is completed in different phases under separate commencement notices, a refund can be claimed for each individual phase provided construction works have commenced. The 30-month period for construction works to commence applies only to the first phase of the development. The “75% test” will apply to each individual phase. Where an individual phase fails to satisfy the “75% test”, a refund may still be claimed on completion of the entire development provided the entire development meets the “75% test”.
How do I claim a refund?
A refund can be claimed when building work commences and must be claimed within four years of the date on which the local authority acknowledges the commencement notice. The application is made on a self-assessment basis.
Where a particular phase of a development fails to satisfy the “75% test” but the entire development will ultimately satisfy the test, the developer can defer their refund claim until construction commences on the final phase of the entire development.
The following documents must be submitted with a refund claim:
- A statutory declaration stating that building work commenced within the 30-month period immediately following the date of execution of the instrument.
- A certified copy of the deed that transferred the land;
- Where there is more than one accountable person, a claim requires the written consent of all of the accountable persons to one of them making the claim
How is the refund calculated?
The amount of a refund is determined by the formula A x B x ⅔ where:
- A = the amount of stamp duty paid at the rate of 6% when the land was acquired
- B = the proportion of the area of the site being developed on foot of a particular commencement notice or 7-day notice
- ⅔ = the fraction that expresses the difference between the 2% (pre-Budget 2018 rate) and 6% rates stamp duty for non-residential land
The maximum amount of the refund available is 4%. The refund may be apportioned in certain cases, for example, where the land contains both residential and non-residential elements.
Can Revenue claw back the refund under any circumstances?
A refund may be clawed back by the Revenue at a later stage where certain criteria are not subsequently satisfied, for example, where construction works are not completed within the relevant timeframe or where the ‘75% test’ is not satisfied.
Interest is payable (at the daily rate of 0.0219%) on a clawback amount from the date on which the refund is made to the date the clawback amount is repaid to Revenue.
Revenue have advised that they are in the process of implementing a new IT system to facilitate the making of claims which is expected to go live at the end of July 2018 and have advised that further guidelines will issue at this time.